Customs union

Customs union one calls a form of the economic integration in the political economy. It concerns a union of states, which form a common customs territory.

A customs union consists on the one hand of a foreign trade zone (i.e. abolishment of and other trade restrictions), on the other hand is characterised a customs union by common external tariffs of the member states opposite third countries. Thus no more do not have to be declared also with spending a member state in the other goods.

The formation of customs unions is connected with commercialcreative and commercialreturning effects. Commercial creation results from the fact that by the omission of tariffs foreign goods are reduced in price, whereby the foreign trade becomes lively. To commercial detour it comes by the fact that trade partners, who remain outside of the customs union are discriminated against opposite those within the formed customs union. Producers from a partner country are not loaded no more by the tariff and to be able therefore to offer possibly more favorably than more efficient producers from a third country, who are displaced therefore.

Example: The countries A, B and C can produce a property with the costs of 15, 10 and/or 8. A raises a tariff from 10, therefore in the country the property costs A, if it is imported from B 20 and if it is imported from C 18. Since the property is more expensive in both cases as if it in A is produced, it comes to no foreign trade. If the three countries form a customs union, C becomes the most favorable offerer and A imports the property from C (commercial creation). Only if A and B form a customs union, then B in place of C becomes the most favorable offerer (commercial detour of C on B).

A customs union is evaluated therefore as economically efficient only if the effects of the commercial detour overcompensate the commercial creation.